Why Hourly Wages Are the Worst Idea in Business

February 17, 2016

9:00 pm

I'm a firm believer that anyone who's not a contracted worker should be on a salary of some sort, or at least a fixed income with regular potential bonuses.

I've been an hourly wage earner for about a year now (stepping back from a more fruitful position). And I've got to say, the most defeating realization at the beginning and end of every week is looking at how many hours I've “worked,” and then seeing what that equals in a paycheck.

Obviously, I and every other employee spend more time than just those hours in the office working on something – thinking about work, coming up with ideas, furthering the company's mission, and generally trying to be better – none of which is represented on a time card.

Sure, there's exceptions to everything. The part-time intern or high school worker showing up for some petty cash usually won't have the same invested in them as someone who works full-time. But, even in those situations, does it mean they shouldn't be offered the potential to be fulfilled human beings?

Whether they care to admit it, and despite what they might or might not say, a person's job is a part of their identity. It doesn't matter what the position is, they carry that identity around with them 24 hours a day, everyday. And yet you only pay them for eight of those hours?

You're actually demotivating people when you do that. Instead of employees being advocates of your business at anytime to anybody, you're making them feel like it's not worth their time.

When you see a family member, catch up with a friend, or really anytime you come into contact with someone you haven't seen in a few days, you hear the same question. “What have you been up to?” As an employer, would you rather the answer to that question be “Just doin' the same old dumb junk. I've been doing this hobby a lot on the side, though,” or would you rather the answer be “I've been helping XYZ company accomplish these goals, and it's going pretty well”?

Great work isn't always done between the hours of 9 AM and 5 PM. A lot of very creative, capable, and intelligent people can't shine because they're not given the opportunity. They're not encouraged. If there's no reward from employers to motivate employees to add value outside the office, all of these potential leaders will either work on their own projects and forget about your company's mission, or look for other employers instead of trying to further your company. Do you really want that? Does any of that sound good?

When someone has to show up and punch a time card, you're telling that person they're only at work to make it through their next billing cycle, or to save up enough to enjoy that one cool experience. You're telling them they're not at the office to add value. Why pay people at all if you're going to tell them they're not valuable? What kind of person does that?

If you're paying someone by the hour, you're probably not paying them what they're worth. Sure, the market ultimately decides what you should pay for whatever services. But if you've got someone on your team who's been with you for years on hourly wages, you know darn well they're worth more to your company than the $10-$12 an hour you're paying them. Do you know how much it costs to give someone else years of experience? You can stand to pay someone more than an hourly rate.

People should be on a salary structure of some sort so that their job, which they take with them wherever they go as part of their identity, can be something they find fulfillment in – that actually enables them to add value to your business. Whatever the added cost, you should give employees a steady amount each week (and give them the potential to earn more) to show your workers that you do care about them, the bills they have to pay, their abilities, their lives outside the office, and especially what they can do for you.

In fact, people who feel valued at work produce so much more that out of Fortune's list of top 100 companies, those with a majority of employees who felt valued catapulted their companies' stock prices to an 8 percent higher value than the market average. That's huge! Not to mention there's a 22 percent swing in daily productivity between employees who are happy to be at work and employees who aren't happy to be there – 22 percent!

I don't care if it “costs” your business more to pay people what they're actually worth as capable and hard working human beings. I'd guarantee you'd earn it back and more by showing appreciation.

It's one of the most self-depreciating thoughts to look at a time sheet and paycheck every week or two when you know you're putting in more effort than what you're getting back. Business owners, do yourself a favor and let employees know that you care about them and that they can add significant value to your business at any level by simply giving them the compliment of more than an hourly wage.

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Kenneth is a writer, marketer, and creative type. Check out his website at !